Information Requested
Details and correspondence (during 2005) referring to, or investigating, allegations of unfair or illegal subsidies for Polish shipyards influencing business competitiveness in Scottish firms, particularly Ferguson 's of Port Glasgow
Information Released
Our interpretation (of the request) is that it goes beyond the formal investigation announced by the European Commission into public sector support for three shipyards in Poland. Remontowa Shipbuilders is not one of those yards. Separately, on the 7 June, Ferguson Shipbuilders lodged a complaint with the Commission against Remontowa, claiming the company is in receipt of illegal state aid. While we understand that the Commission is considering this complaint, we are not aware that they have lodged a formal investigation. Our reply takes into account papers held in relation to this complaint and also papers held in relation to recent procurement processes overseen by Scottish Ministers.
Background
The Scottish Fisheries Protection Agency and CalMac are in the process of procuring additional vessel capability. These procurement processes are, in order to ensure a level playing field across Europe, conducted under strict rules set by the European Union.
The query relates to the investigation into unfair and illegal subsidies for Polish Shipyards. Responsibility for investigations into unfair or illegal subsidies rests with the European Union and not with the Scottish Executive. Furthermore, under the Scotland Act, it falls to the lead UK Department, in this case the Department of Trade and Industry (DTI) to make any formal complaint on such matters, if the UK Government or Scottish Ministers had evidence to put forward. Therefore while the UK Government and Scottish Ministers are fully committed to ensuring that all UK companies can compete on fair terms across Europe, it falls to the European Union to investigate breaches to EU wide rules.
Nevertheless, the Executive has been fully aware and takes very seriously the concerns raised by, amongst others, Fergusons Shipyard, that the EU-wide rules governing State Aids and competition policy may have been breached by Polish shipyards. While not in the scope of this request, you may be aware that the Executive was fully aware of the concerns raised by Fergusons during 2004, and assessed these representations in dialogue with UK Ministers and officials.
Ferguson Shipbuilders has made a number of representations to UK and Scottish Ministers with respect to public contracts in the last year, i.e. General Lighthouse Authority and Scottish Fisheries Protection Agency (SFPA) contracts. In both instances Ferguson alleged that it was unable to compete on a level playing with its Polish competitor, Remontowa, whom it believes is in receipt of illegal state aid.
The Department for Transport and Scottish Ministers investigated these allegations in relation to their respective tender processes, and found no evidence of illegal state aid.
The Scottish Executive raised Ferguson's assertions of unfair competition with UK Ministers in October last year. These concerned the tender for a General Lighthouse Authority vessel. The UK Government at that time took the view that there was no evidence to corroborate Ferguson's complaint. DTI Ministers advised Ferguson in November last year that it could not raise the issue with the European Commission without tangible evidence, which Ferguson could not produce. However UK and Scottish Ministers advised Ferguson that it could raise a complaint directly with the European Commission.
In June 2005, Fergusons made a formal complaint to the EU, which led to the Commissions current consideration of the matter. Against this background a number of papers and correspondence are held by the Executive.
The information which the Executive holds relates primarily to exchanges between Executive Ministers and officials in relation to deliberations on the evaluation of factors which may influence differences in the tender details which might suggest an investigation was required. In addition, the papers held include exchanges of information with UK Ministers and officials, with commercial organisations and with the European Union.
We have assessed that part of this material is exempt from disclosure due to exemptions available under Freedom of Information Scotland Act (FOI(S)A). In reaching our decision we have applied the "public interest test" where we consider whether it would be in the public interest to either release or withhold information.
Some papers include evaluation of the tenders received for the ongoing tender processes for the SFPA vessel or for the CalMac vessel. At the current time, the contract for the SFPA vessel has not yet been awarded. Remontowa have "preferred bidder" status. The public interest therefore lies in the financial interests of the Scottish Executive being protected in the tender process, and of the commercial interests of the tenderers being protected. Once the contract is awarded, some details of the tenders may be made available, in line with the Scottish Executive's guidance on procurements and FOI (see link below).
Information on the relationship between Scottish Public Sector procurement and Freedom of Information, and the information which can be disclosed at various stages of a procurement, is available on the Scottish Executive website:
http://www.scotland.gov.uk/Topics/Government/SPD/19468/21682
The following documents were also released in response to this FOI request:
- The concerns raised by Fergusons to the Scottish Executive (in a letter from Crawford McKechnie on 28 April 2005)
- The answer provided by Mr Finnie, the Minister for Environment and Rural Development, on 8 July 2005
To obtain this information please email: Margaret.Horn@scotland.gsi.gov.uk
Commission investigation
On 1 June, the EU announced that it would open formal inquiries into public sector support for three shipyards in Poland in the light of EC Treaty rules on state aid. The EC website and their press release providing details of the inquiry, is attached below.
http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP/05/644&format=HTML&aged=0&language=EN&guiLanguage=en
The EC have yet to formally report on the outcome of their inquiry.
On 13 June, the State Aids Unit within the Scottish Executive circulated to relevant officials the weblink to the guidance on complaints, following a request for assistance on the appropriate procedures. The relevant link to the EU website is attached below.
http://europa.eu.int/eur-lex/pri/en/oj/dat/1999/l_083/l_08319990327en00010009.pdf
Correspondence from UK Ministers and the EU
Against this background, and recognising the implications for shipbuilding in Scotland of decisions relating to the SFPA and CalMac procurement processes, Mr Finnie, with the support of DTI Ministers and UK Permanent Representation in Europe (UKREP), wrote to Charlie McCreevey, EU Commissioner for Internal Market and Services, on 15 June, to ask for information on Commission analysis of issues related to procurement and state aids. Commissioner McCreevy replied on 13 July.
As has been separately reported, David Cairns MP met with Alun Michael, Minister for State at the DTI on 8 June, which was followed by 2 items of correspondence, copied to Scottish Ministers.*
Following these discussions, UKREP, on behalf of DTI, forwarded David Cairns letter to the Directorate-General for Competition on 24 June, to be considered as part of Ferguson's complaint, and received an acknowledgement on 11 July. We also hold correspondence from Remontowa to Mrs Nellie Kroes, dated 21 June, on the matter of allegations on illegal subsidies reported in the Scottish press.
While we understand that DG Competition are considering the representations made by Ferguson's, we are not aware that they have launched formal proceedings, as is the case for the three yards noted above. At this stage, we are awaiting the outcome of the Commission's enquiries. Ministers are not entitled under EU procurement rules to reject a tender purely on the basis that one company has raised concerns, including a formal complaint, about a competitor with the EU.
During this period, there was also a series of contacts at official and Ministerial level with the UK Government on matters related to the representations.
* Letter from David Cairns, MP, to Alun Michael, MP, on 9th June.